Neoliberal Reforms Strengthening Monopoly Power and Abuses

KUALA LUMPUR and SYDNEY, May 7 2019 (IPS)*– Over the last four decades, growing concentration of market power in the hands of oligopolies, if not monopolies, has been greatly enabled by ostensibly neo-liberal reforms, worsening wealth concentration and gross inequalities in the world.

Jomo Kwame Sundaram

The ‘counter-revolution’ against Keynesian and development economics four decades ago, which inspired the Washington Consensus, claimed to promote economic liberalization, including market competition, but strengthening property rights entitlements, especially for intellectual property, has been far more important.

Such oligopolistic and monopolistic trends have recently accelerated in much of the world, while already feeble anti-trust efforts have lagged far behind.

Over a century after US President Teddy Roosevelt’s anti-trust initiatives, with the neoliberal rhetoric of recent decades, many all over the world still have great expectations of similar US reform initiatives.

Privacy legislation for?
Responding to the ‘big data’ controversy, Apple CEO Tim Cook’s recent Timemagazine opinion called for US privacy legislation informed by four principles for user rights: first, corporations should collect as little user data as possible; second, users should know what data has been collected and why; third, users should be able “to access, correct and delete [their] personal data”; and fourth, data should be secure, “without which trust is impossible”.

Cook has also proposed a US Federal Trade Commission (FTC) ‘data-broker clearinghouse’, with all entities handling data required to register so that the public can track how their data has been sold, and delete their own, if they so choose.

While national privacy legislation should include these principles, the proposals do not recognize that transparency and post hoc control do not address some of the worst dangers posed by online platform monopolies such as Google and Amazon.

Anis Chowdhury

Their monopolistic market power implies that users are often not really able to exercise their notional rights to privacy. For example, without a realistic alternative to Google’s search function, people have little option but to provide personal information about themselves, especially when their work or participating in society requires them to use Google.

Effective privacy legislation thus requires regulating such corporations so that they no longer have any incentive to exploit user data. As Cambridge Analytica whistle-blower Christopher Wylie has suggested, “We should take a step back from this narrative of consent and start to look at the fact that people don’t have a choice.”

Digital public policy?
Facebook and Google are able to collect considerable personal data, enabling them to secure monopoly profits by renting their platforms and data to third parties.

These third parties can then use the Facebook and Google platforms and their vast personal data troves to manipulate what individual users see, read, think and buy. Google thus earned some US$95 billion, while Facebook earned about US$40 billion in 2017 alone.

Appropriate public policy can make this business model far less lucrative. The US has previously used various ‘common carriage’ rules to limit or prevent railways, telecommunication companies and other monopolistic owners of essential infrastructure from discriminating among different users.

For example, AT&T was not allowed to set different rates or terms of service for different people based on what it could learn about their personal lives. Applying similar rules to Google, Facebook and Amazon now would reduce much of their incentive to collect, use, sell or rent personal data by limiting their means to profit from thus using such information.

To be sure, Apple also benefits from the Google and Facebook business models. In 2018, Google paid Apple US$9 billion to become the default search engine on Apple products, while Goldman Sachs expects such payments to increase to US$12 billion in 2019.

US reforms today
The US-based Open Markets Institute (OMI) has proposed new laws to overrule pro-monopoly judicial precedents and to empower employees, consumers and small businesses against abuses by large monopolies.

Accordingly, the OMI has proposed four measures to the US Congress’ Judiciary Committee: first, investigate growing concentration in and control of specific industries; second, conduct hearings on the relationship of such concentration to political corruption; third, educate the public about what it describes as the national ‘monopoly crisis’; and fourth, advocate anti-monopoly policies and principles with other Congressional committees and federal agencies.

Developing countries?
However, it is doubtful that the rest of the world, especially developing countries, can count on US policy reforms to protect, let alone advance their best interests, whether in terms of development or even, appropriate competition policy.

Given the limited size of most developing economies, a single minded obsession with competition may well undermine the likelihood of achieving economies of scale and international competitiveness, both important for accelerating economic development.

Size matters, and what may be appropriate for large economies may not be appropriate for smaller national economies. Furthermore, the limited jurisdiction of US legislation is likely to encourage corporations to engage in regulatory arbitrage abroad to their own advantage.

In any case, even if US lawmakers and regulators are able to protect and advance the US public interest through appropriate and effective regulatory policy, there is little reason to assume that the best interests of others will be best served by the effective exercise of US regulation.